Republic Protocol (REN) isn’t your average exchange. Instead, it operates what’s known as a ‘dark pool’. This may sound suspicious and borderline illegal, but it is in fact a type of exchange that has operated in regular markets for decades, and is something that Republic Protocol wants to bring to cryptocurrency markets. Here we take a look at this interesting project and the technology behind it.
Taking a Dip in the Dark Pool
Firstly, you may be wondering what a dark pool is. A dark pool is simply an exchange where transactions occur on a hidden order book. It allows large amounts of tokens to be traded without users revealing their identity or the size of their trade until after the trade is filled. This results in significant liquidity at better execution prices with minimal market impact compared to exchanges with a public order book. JPMorgan, Deutsche Bank, Goldman Sachs, Morgan Stanley, and Fidelity are just some of the brokers who own dark pools. With institutions like these already getting involved in the cryptocurrency space and more expected, it can be presumed that they would eventually want to take advantage of the same mechanisms they are used to in their regular asset trading.
What’s the Demand for Dark Pools?
In traditional US and European equities markets, dark pools constitute roughly 10% to 30% of all trades. At current levels, this would be the equivalent of $1.48 billion to $4.46 billion going through cryptocurrency dark pools every day. Many prominent cryptocurrency enthusiasts however have been very bullish on the long-term potential of cryptocurrency, with Binance chief Changpeng Zhao speculating that “crypto will absolutely grow 1000x and more”. A 1000x increase could present a staggering $1.48 trillion daily volume going through dark pool exchanges. Of course, there’s no saying at this stage just how much, or how little, a dark pool would be used, but even these low estimates bode well for pioneering dark pool creators like Republic Protocol.
What’s in it for REN Holders?
The Republic Protocol ‘matching engine’ is powered by REN tokens, which users must buy to use. It is anticipated therefore that REN tokens will increase in price in line with demand as platform adoption increases. As the Republic Protocol platform is decentralized it means that holders of REN masternodes (100,000 REN) will be rewarded with a percentage of the daily trading fees, which could turn out to be a very handsome stream of income over time.
One of a Kind
Republic Protocol is currently the only project applying dark pool technology to the cryptocurrency sector, with masternode testing beginning in January. They therefore have first-mover advantage and, providing the technology works and the market picks up as many hope, this could prove to be one of the few genuinely promising long-term crypto projects out there.